THE rand weakened past 17 per dollar on Monday as the South African currency’s resilience is tested by fears of a US recession even as local fundamentals remain supportive.
History shows the rand tends to decline sharply when the world’s economic engine is in recession. Skipping the broad Covid-related slump in global markets in 2020, the US recessions of 2008/9 and 2001 knocked as much as 13% off the rand’s value.
Based on Bloomberg scenario-planning tools, similar conditions this time round could see the rand weaken by about 12%.
In the first half of the year, the rand benefited from high commodity prices that lifted the current account into surplus. Improving fiscal metrics and a hawkish tilt at the central bank also helped. The market remains heavily long rand, according to US Commodity Futures Trading Commission data, leaving the currency at high risk of a selloff as conditions change.
“Even
You’ve reached your free article limit
Subscribe to enjoy unlimited access to trusted journalism. Cancel anytime.
Subscribe nowNeed help? molokom@insidepolitic.co.za
